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Dollar Is Increasingly Overvalued as Deficit Widens, IIF Says

ForexMar 04, 2021 08:27AM ET
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© Reuters. Dollar Is Increasingly Overvalued as Deficit Widens, IIF Says

(Bloomberg) -- The dollar has become increasingly overvalued thanks to a swelling U.S. current-account deficit, according to the Institute of International Finance.

China’s yuan is the mirror image, becoming increasingly undervalued, the IIF found in a periodic assessment of exchange-rate misalignments.

“The biggest surprise is that U.S. dollar overvaluation has grown since our November 2020 update, even though the dollar has fallen,” Robin Brooks, the IIF’s chief economist, wrote in a March 4 report. “The offset to this overvaluation is China, where the renminbi is substantially undervalued.”

The “aggressive” deployment of fiscal stimulus in the U.S. has helped boost its economic growth prospects, in turn widening the country’s current-account deficit, Brooks wrote.

IIF modeling indicates the dollar is 11.7% overvalued, compared with 10.2% in the November analysis, while China’s yuan -- also known as the renminbi -- is 12.8% undervalued, slightly less than the 13.4% last time.

Brazil’s real is some 18.6% undervalued in the latest tally, while the Russian ruble's shortfall from fair value is 13.9%, according to the IIF.

©2021 Bloomberg L.P.

 

Dollar Is Increasingly Overvalued as Deficit Widens, IIF Says
 

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Comments (5)
Viking Fire
Viking Fire Mar 05, 2021 3:12AM ET
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Pays to be a democratic country where investors and people can trust their court systems.
Reza Tusi
Reza Tusi Mar 04, 2021 6:50PM ET
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what a terrible comparison.. the rate is always set by PBOC not based on demand and supply..
Javier Vargas
Javier Vargas Mar 04, 2021 11:38AM ET
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Probably the North Korean currency should bear the dollar too according to this.
Viking Fire
Viking Fire Mar 04, 2021 11:26AM ET
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Thats the difference between a country where the world trusts their money is in good hands vs. one where their dear leader can confiscate it any time he wishes
Reza Tusi
Reza Tusi Mar 04, 2021 11:26AM ET
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trust?! we should use this word wisely...
taylor jason
taylor jason Mar 04, 2021 10:36AM ET
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good article-- should see Chinese bonds rally while usd continue to slump
Viking Fire
Viking Fire Mar 04, 2021 10:36AM ET
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Wow now china thinks eveyone is named taylor and jason lol
 
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